A Senior Vice President At A.I.G. Is Put on Leave

By JENNY ANDERSON

Published: April 19, 2005

An executive at the American International Group, the insurance giant, has been put on leave amid a sweeping investigation into the company's accounting.

The executive, Michael J. Castelli, a former comptroller who was appointed chief administrative officer and a senior vice president in January, was put on leave recently, a company spokesman said. The spokesman declined to comment on why Mr. Castelli was put on leave.

Mr. Castelli, who served as comptroller for A.I.G. from 2000-4, is cooperating with regulators, people briefed on the investigation said.

Mr. Castelli could not be reached for comment.

More executives are expected to leave the company in coming months as an internal examination of its accounting practices progresses. A.I.G. is struggling to conclude its review to meet an April 30 deadline for its annual federal filing with regulators. A.I.G. has already delayed the filing of that report twice.

Regulators say A.I.G. continues to report more questionable transactions to them. As investigators sort out the new information, they are also coming up to decisions on whether to pursue criminal or civil actions and against whom.

The New York attorney general, Eliot Spitzer, who has authority under the state's Martin Act to pursue a criminal case, has said that he thought a civil settlement with the company was ''achievable.'' But he has also said that a 2000 deal with General Re that artificially bolstered A.I.G.'s reserves was a ''fraud.''

What path he or the Justice Department will take is unclear. The Securities and Exchange Commission and the New York Department of Insurance are also part of the investigation.

The inquiry has focused on Maurice R. Greenberg, who built A.I.G. into a global giant over four decades and was forced in March to resign as chief executive. Last week, he appeared before regulators and invoked his constitutional right not to testify.

Other A.I.G. executives who have invoked their Fifth Amendment rights against self-incrimination have been fired, including Howard Smith, a former chief financial officer, and Christian M. Milton, a former vice president of reinsurance.

In the January news release that announced Mr. Castelli's promotion, Mr. Smith said, ''Mike Castelli has made significant contributions to A.I.G. during his tenure as comptroller, most recently having an integral role in complying with the complex demands of the new Sarbanes-Oxley reporting requirements.''

Regulators are examining dozens of transactions that allowed A.I.G. to dress up its balance sheet.

Already the company has indicated that it improperly accounted for one transaction with a subsidiary of Berkshire Hathaway, General Re.

It has also said it misled state insurance regulators about its relationship with a handful of reinsurance companies, including Union Excess and Richmond Reinsurance. A.I.G. said it would restate its net worth by $1.7 billion.

The investigation has taken a toll on A.I.G. Its stock price has fallen 30 percent since the company disclosed on Feb. 14 that it had received subpoenas from the S.E.C. and the New York attorney general's office. Yesterday, shares of A.I.G. gained 15 cents, to $51.26.